
\documentclass{article}

\title{Learning to Bank: Technical Report}

\author{Patrick Caldon}

\abstract{
Objective: We explore using unsupervised learning techniques to build
agents which can control a banking institution.  

Method: An agent is a collection of rules, with actions to accept loans,
accept deposits, and pay dividends.  A simulated regulator monitors
institutions and siezes them if capital and liquidity ratios fall
below threshold levels.  A simulated environment based on real-world
historical data offers the bank loans and deposits, and demands
dividends in exchange for capital.
Agents evolve with a-life techniques. 

Results: The system discovers agents which can maintain an MCR near 20\% and experience
insolvency in fewer than 1 in 100 trials.

Conclusion: 

}

\begin{document}

\maketitle

\section{Introduction}

* Note that all percentages are annual unless otherwise specified.

\section{Framework}

\subsection{Banking}

At heart, the business of banking is simple. Banks accept deposits and
wholesale debt from depositors and lenders at a low interest rate, say
4\%. They take capital from investors, who hope for higher
returns. They then lend the cash on hand back out at a higher rate,
say 6\%. The difference between the rate on the deposits and the rate
on the loans is the top-line profit of the organization.  Banks add
fee income, deduct impairment losses for bad debts, and in so doing
make a profit.  Part of the profit is distributed to investors as
dividends.

An example profit-and-loss statement is shown below.

% example

The bank must hold more assets than it has debts otherwise it will be
insolvent. Furthermore it must carry a margin of safety sufficent so
that if its assets become imapired, that is if it lends money to
people who won't pay it back, it can still make good the commitments
to its depositors.  This is expressed as a capital ratio.  It must
also carry a sufficient proportion of liquid assets which it can
convert readily into cash and so pay back its borrowers.

An example balance sheet is shown below.

% example

[ 

Financial book X describes what's required to bank sucessfully.  You
need to:

* Maturity profile
* Liquidity
* Credit evaluation
* Funding mix
* Deliver RoE
* Control Expenses

]

\subsection{Agents}

Agents are described using a simple agent language.  This language
describes a function:

Bond x Bank -> Boolean

\subsection{Agent Evolution}

Agents have several actions 

\subsection{Environment and Regulation}

\subsection{Implementation}

\section{Experiments and Results}

\subsection{Evaluation Methodology}

The objective is to produce sucessful, profitable agents.  Profit is
measured as the total cash return.  

\subsection{Simulation